Siemens 2005 Annual Report Download - page 153

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153
is classified as held for sale or that has been disposed of if the operations and cash flows of the
component will be (or have been) eliminated from the ongoing operations of the entity and the
entity will not have any significant continuing involvement in the operations of the component.
SFAS 144 requires long-lived assets to be disposed of by sale to be recorded at the lower of carry-
ing amount or fair value less costs to sell and to cease depreciation.
Accounting changes – Recent accounting pronouncements to be implemented – In
December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payment (SFAS 123R),
which replaces SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB 25,
Accounting for Stock Issued to Employees, and related interpretations. SFAS 123R requires com-
panies to recognize the cost resulting from all share-based payment transactions in the financial
statements. With certain limited exceptions, the new standard establishes a grant-date fair-value-
based measurement method in accounting for share-based payment transactions. Liability-classi-
fied awards are to be remeasured to fair value at each reporting date until the award is settled.
Equity-classified awards are measured at grant-date fair value whereas related compensation cost
is recognized based on the estimated number of instruments for which the requisite service is
expected to be rendered. In April 2005, the SEC issued a release allowing postponement of the
effective date of SFAS 123R. In accordance with the SEC release, Siemens will adopt SFAS 123R in
the first quarter of fiscal 2006. For its equity-classified awards, the Company intends to apply the
modified prospective transition method. Under this method, unvested equity-classified awards
granted prior to the effective date of the new statement are accounted for under SFAS 123R and
related costs are recognized in the income statement. The adoption of SFAS 123R, including the
remeasurement from intrinsic value to fair value of liability classified awards, is not expected to
have a material impact on the Company’s consolidated financial statements.
In June 2005, the FASB ratified EITF Issue 05-5, Accounting for Early Retirement or Postemploy-
ment Programs with Specific Features (such as Terms Specified in Altersteilzeit Early Retirement
Arrangements). Altersteilzeit (ATZ) in Germany is an incentive and benefit program towards
early retirement. Companies are required to recognize the salary ratably over the active service
period. Accruals for Company-granted bonuses shall be recorded ratably from the date the indi-
vidual employee enrolls in the ATZ arrangement to the end of the active service period. Related
government subsidies are accounted for separately from the ATZ benefits at the time the criteria
to receive them are met. EITF 05-5 is effective for fiscal years beginning after December 15, 2005.
The adoption of EITF 05-5 is not expected to have a material impact on the Company’s consolidat-
ed financial statements.
In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections – a replace-
ment of APB No. 20 and FASB Statement No. 3. This Statement changes the requirements for the
accounting for and reporting of a change in accounting principle. It applies to all voluntary
changes in accounting principle, error corrections and required changes due to new accounting
pronouncements which do not specify a certain transition method. The Statement generally re-
quires retrospective application to prior periods’ financial statements for changes in accounting
principle, unless it is impracticable to determine either the period-specific effects or the cumula-
tive effect of the change. In addition, this Statement requires that retrospective application of a
change in accounting principle be limited to the direct effects of the change. It also requires that
a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets
be accounted for on a prospective basis. The Company plans to early adopt this Standard begin-
ning October 1, 2005. The adoption of SFAS 154 is not expected to have a material impact on the
Company’s consolidated financial statements.
Notes to Consolidated Financial Statements
Consolidated Financial Statements Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated
and per share amounts)